Banks’ Size Is Greater Threat Than Complexity

Senators from both sides of the political divide are displaying an encouraging resolve to break up the country’s biggest banks. Unfortunately, they’re focusing too much on the complexity of big bank operations and ignoring the greater threat entailed in their enormous size.

Earlier this month, a bipartisan group of senators, led by Democrat Elizabeth Warren and Republican John McCain, introduced a piece of legislation known as the “21st Century Glass Steagall Act.” In just 30 pages, the legislation re-separates federally insured commercial banking from all other types of diversified financial activities, including insurance, securities activities, derivatives operations and hedge-fund and private-equity investments. It is aimed squarely at our too-big-to-fail banks, just five of which command about two-thirds of all the industry’s assets.